Spring home buying season has kicked into high gear, but it wasn't enough to boost mortgage applications, which fell by 1 percent last week from the previous week, the Mortgage Bankers Association reported. That was largely due to a drop in refinancings, which slipped 3 percent.
The refinance share of mortgage applications fell to its lowest level since July, as interest rates inched higher. Rates for 15-year fixed rate mortgages, a popular refinance option, rose slightly to 3.19 percent. The average rate for a 30-year fixed rate mortgage increased by a tenth of 1 percent to 3.94 percent for loans $417,000 or less. Loans for more than $417,000, known as jumbo mortgages, fell slightly to 3.82 percent.
Cumulatively, rates on 30-year fixed rate mortgages have increased by 11 basis points over the last four weeks. But that trend could take a turn.
Federal Reserve Chair Janet Yellen told the Economics Club of New York on Tuesday that the central bank will "proceed cautiously" as it considers raising rates.
"As the market incorporates beliefs about a lower rate path in the wake of Chairwoman Yellen's comments, mortgage rates are likely to follow the 10-year Treasury yield downwards this week," said Lynn Fisher, the MBA's vice president of research and economics.
Lower rates tend to spur home buying, but low inventory is holding back home sales as eager buyers are bidding up prices. The S&P/Case-Shiller 20-city composite index rose 5.7 percent in January from a year ago.
"We have seen home prices very strong, if that's something that the Fed looks at, and it probably is, it probably points to a little bit of inflation around the corner," David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices, told CNBC's "Squawk on the Street."